Oil prices rebounded sharply on Wednesday, reversing part of the previous session's steep decline, as renewed tensions in the Middle East reignited concerns over global crude supplies. Lower US crude inventories and expectations around OPEC+ production policy also lent support to the market. Brent crude climbed 4.41% to $87.80 a barrel, gaining $3.71, while US West Texas Intermediate (WTI) crude rose 4.23%, or $3.35, to $82.61 a barrel, according to Business Today.
Geopolitical Risk and Strait of Hormuz
The market had retreated nearly 5% on Tuesday, touching a two-week low after hopes emerged that the pause in hostilities between Washington and Tehran could pave the way for renewed diplomatic engagement. Those expectations were tempered as the regional security situation deteriorated once again. Fresh concerns centred on the Strait of Hormuz, a key oil shipping route. Business Today reported that any prolonged disruption in the waterway could raise energy costs further, increase transportation expenses, push fuel prices higher and add inflationary pressure across major economies.
Military developments in the region also remained in focus. Saudi Arabia said that it had joined the US Central Command (CENTCOM) in carrying out air strikes on Iran-backed militant targets in Iraq after recent drone attacks on Saudi oil facilities. The Saudi defence ministry said that the kingdom was not seeking escalation but would respond to actions threatening its security and critical infrastructure. CENTCOM said the joint operation targeted multiple Iran-aligned militant logistics and weapons sites in eastern Iraq on July 28 after more than 30 IRGC-directed drone attacks were launched over the previous 72 hours against US forces and Saudi energy infrastructure.
US Inventory Data and Supply Cues
At the same time, signs of tighter US crude supplies added to bullish sentiment. Market sources, citing data from the American Petroleum Institute (API), said US crude inventories fell by around 3.3 million barrels in the week ended July 24. However, gasoline stocks increased by 918,000 barrels, while distillate inventories rose by 355,000 barrels from the previous week. Official data from the Energy Information Administration (EIA) is due later on Wednesday.
The rising tensions have also prompted shipping companies operating in the Gulf to remain on alert. Several operators have altered sailing routes, tightened onboard security measures and reassessed insurance coverage amid fears of further attacks on commercial vessels.
OPEC+ Policy and Market Volatility
Oil prices also found support from expectations that OPEC+ could pause planned production increases for three months from October after completing the scheduled return of barrels following voluntary output cuts. The market has remained highly volatile amid the US-Israeli war in Iran, which has disrupted global crude flows, particularly following the effective closure of the Strait of Hormuz.
US President Donald Trump, who called off a two-week US bombing campaign over the weekend, told Fox News on Tuesday that there were "good talks" with Iran, while warning that more strikes could follow if negotiations fail. Iran, however, denied that it is seeking to resume talks with the United States.
Key Data Points
| Indicator | Value | Change |
|---|---|---|
| Brent Crude (ICE) | $87.80/barrel | +4.41% (+$3.71) |
| WTI Crude (NYMEX) | $82.61/barrel | +4.23% (+$3.35) |
| US Crude Inventories (API) | -3.3 million barrels | Weekly draw |
| US Gasoline Stocks (API) | +918,000 barrels | Weekly build |
| US Distillate Inventories (API) | +355,000 barrels | Weekly build |
For commodity traders and analysts, the interplay between geopolitical risk and supply data remains critical. The potential for further disruptions in the Strait of Hormuz and the upcoming EIA report will likely drive near-term volatility, while OPEC+'s production decision adds another layer of complexity to the supply outlook.
Sources:
